Rising number of firms planning redundancies in U.K.

First quarter of 2012 most difficult since recession: CIPD
|hrreporter.com|Last Updated: 02/13/2012

The first quarter of 2012 will be the most difficult quarter for the jobs market in the United Kingdom since the recession, as the number of private sector firms planning to make redundancies increases.

That’s according to the latest Chartered Institute of Personnel and Development (CIPD) quarterly Labour Market Outlook survey of 1,019 HR professionals.

The survey's findings are consistent with the consensus of economic forecasts and reinforce the CIPD's prediction unemployment could reach 2.85 million by end of 2012 if business conditions do not improve.

The report's net employment balance, which measures the difference between the proportion of labour market opinion (LMO) employers that intend to increase total staffing levels and those that intend to decrease total staffing levels in the first quarter of 2012, has fallen to negative eight from negative three since the autumn 2011 quarter. This is the report's worst figure since spring 2009.

The survey's 12-month balance, which gives a longer-term perspective on the net effect of recruitment and redundancy intentions, has also fallen to negative six from negative two.

The worsening overall employment prospects are almost entirely accounted for by a drop in confidence in the private sector during the past three months, said CIPD. Although net private sector employment intentions remain in positive territory, they have fallen from plus 20 to a much more subdued plus 10 in the past three months — further undermining hopes private sector recruitment will compensate for reductions in public sector employment.

In reviewing the past two years, almost one-half (47 per cent) of employers feel they have been prevented from creating new roles over and above existing levels. Among those employers that feel they have encountered barriers to hiring, the main barriers highlighted are access to finance (54 per cent) and skill shortages (21 per cent).

"Whereas employers were in wait-and-see mode three months ago, more private sector firms, particularly among private sector services firms, have decided to push the redundancy button in response to worsening economic news,” said Gerwyn Davies, public policy adviser at CIPD. “This will exert yet more pressure on a jobs market that is buckling under the strains of contractions in economic growth and public sector employment.”

The prospect of more redundancies in so many firms also poses significant management challenges that businesses need to address urgently, said CIPD.

"With redundancies looking set to be a feature in growing numbers of firms in the months to come, business leaders need to focus attention on communicating and consulting with staff to build trust and employee engagement in these uncertain times,” said Davis. “Employees are likely to respond more positively to change, and even to the threat of redundancies, if they feel that they have a voice in the workplace and that senior leaders listen to their views before taking decisions."

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